Decision looms on hospital bed tax

Last week’s column recounted the hospital bed tax/fee passed by the Legislature in 2010 which helped the state fill a hole in the Medicaid budget. This fee/tax is similar to the arrangement already in place with nursing homes. Simply put, the fee is collected from most hospitals, matched with federal Medicaid funds at a 35/65 ratio and hospitals that are heavily serving Medicaid populations receive much or all of their contributions back in the form of a rate increase.

This week’s subsequent column outlines who are the winners and losers of this plan.

The federal law — all must pay inFederal law requires that any taxes or fees used for drawing down Medicaid dollars be equally assessed and not target any one group. So hospitals that provide little or no Medicaid services are still subject to the fee. The winners of this fee arrangement are hospitals, like safety net hospitals, that serve a high volume of Medicaid patients. They pay the fee like other hospitals, but their reimbursements are raised by 12 percent — more than enough to cover the amount paid out in fees.

Sixty percent of hospitals in Georgia benefit or are not impacted by the fee when adjusted for increased reimbursements. The remaining hospitals that do not serve significant amounts Medicaid patients may see a net loss from the fee.

Hospitals that benefit from this program are usually safety net hospitals and serve a significant number of Medicaid patients. In the Savannah area, Memorial Health University Medical Center is the largest beneficiary of this program. In the Atlanta area, the Children’s Hospitals and Grady Hospital are the main beneficiaries.

In FY2011, Memorial paid $5.6 million in provider fees but received $6.8 million in increased reimbursements. An analysis of FY2011 provider fee payments and reimbursements reveals an interesting picture.

Of the 100 hospitals that paid more than $250,000 in provider fees, almost half received an equal or greater amount back in increased reimbursements. Almost three-quarters recovered at least 70 percent of their fees through increased reimbursements. The average provider fee was $2.1 million while the average increased reimbursement was $2.2 million.

Budget shortfall againThe fee sunsets on June 30, 2013, and will have to be renewed legislatively in order to continue in FY2014. Unfortunately, Georgia is in a very similar circumstance to where the state was just three years ago.

Proponents of renewing the fee will note that Medicaid will be short by approximately $400 million in FY2014 and other areas like retirement and education will demand more.

The loss of the fee would require additional cuts to cover the state’s obligations under the Medicaid program. Currently, Medicaid is expected to take a 5 percent cut in 2014, and it is unknown how this will impact services.

Another issue is the shortage of Medicaid providers and what will happen if hospitals lose the 12 percent reimbursement increase. There is a growing consensus that a number of small or rural hospitals might close if these funds are lost and reimbursement is cut 12 percent.

The consideration of the extension of the hospital bed tax/fee will be an integral part of meeting the budgetary challenges of the 2013 session.